The road less funded

Jeffrey Yan is on a hero’s journey.

He probably didn’t know that before reading his long-form profile in Colossus, but that’s always how it works. When a founder has achieved breakthrough success in a new field, they inevitably get the Joseph Campbell treatment: their life story turned into a narrative arc of personal triumph and business history.

It’s not the exact cycle that Campbell’s mythological heroes endured — there’s no supernatural aid involved, for example, and atonement is optional. 

But it’s pretty close to what the great mythologist described: Our business heroes, living a normal life, feel a call to adventure. They take a leap into the unknown. They risk everything, teeter on the edge of disaster, and overcome all obstacles. Triumphant, they return home to improve the world they came from.

It’s a media-generated narrative, of course. But there’s often enough truth in it to make for a compelling story. Sometimes it’s even how we come to understand whole industries.

The story of software is the story of Bill Gates, as told by James Wallace. The story of consumer electronics is the story of Steve Jobs, as told by Walter Isaacson. The story of e-commerce is the story of Jeff Bezos, as told by Brad Stone. 

If the Hyperliquid blockchain ever comes to “house all of finance,” as Yan hopes it will, the story of crypto might become the story of Jeffrey Yan, as told by Dom Cooke.

There will be lots of myth-making details to work with.

Yan’s journey begins in California, where he’s raised by a single mom. An archival photo proves he was a solitary child, typically in the playground by himself, with only his loyal dog for company.

Neither Yan nor the world knows he’s a child prodigy until an eighth-grade classmate introduces him to competitive math. Within a year — entirely self-taught — Yan becomes one of the country’s top 50 high school students in math, Cooke says. At 16, Yan teaches himself physics from whatever textbooks he can find. Just a year later, he’s “one of the top five young physicists in the country.”

These exploits earn Yan a scholarship to Harvard, where he learns he has a proficiency for computer science, too. A summer internship then leads to a job at Hudson River Trading, which he enjoys. “He thought trading was the purest real-life game you could play,” Cooke writes.

It was a game he excelled at, but Cooke says he found it unfulfilling: “He did not have a good answer to the question he couldn’t stop thinking about: What value are you adding to the world?”

After reading the Ethereum white paper, however, Yan told Cooke he had found his answer: “I felt like I could go and build a thing that would revolutionize finance.”

This inspired a hero’s leap into the unknown.

Yan moved to the tax haven of Puerto Rico with $10,000 and “a sense that something big was coming.” 

In a one-bedroom apartment shared with his girlfriend, he traded crypto from the living room — on a computer plugged into a TV. For two years, he didn’t even have a monitor.

(Ye of little faith may question that particular detail, because what does a monitor cost? $100? But it’s the details that make a story. Especially a hero’s one.)

Yan worked like a person with a calling — “14 hours a day, at a minimum.” That didn’t leave much time for date nights with his girlfriend: “She was allotted roughly 30 minutes of his attention per day. The rest belonged to the trading algorithms scrolling across the television.” 

He also cut his own hair because going to a barber takes time (and crypto markets are always open).

The long hours paid off. Yan made money at an astonishing rate: For two and a half years, his initial stake grew at “thousands of percent a year.” He hired a team of traders and they, too, were highly profitable.

(We do not learn whether it paid off with the girlfriend.) 

But in 2022, after the collapse of FTX, Yan made the decision to stop trading and focus on a new mission: the decentralization of finance.

He had heard a business-hero’s calling, as Cooke tells it: “Yan told his team they were going to start building something new. He wasn’t sure what. He had ideas, none of which he found convincing. He just knew that Satoshi Nakamoto’s original vision for Bitcoin was being quietly buried by the industry Satoshi had created.”

What they were building turned out to be a semi-decentralized exchange for perpetual futures that anyone could trade on (Hyperliquid), and then an exchange-optimized blockchain that anyone could build on (also called Hyperliquid).

There’s nothing necessarily extraordinary about founding an exchange or building a blockchain. But Yan walked his own path. 

He refused to pay market makers to come to his exchange: “You’re never gonna take off if you don’t pay us,” one told him.

He refused to retain any of the fees the exchange was generating: “Yan had insisted from the start that none of it would flow to the team,” Cooke says.

Despite burning through “hundreds of thousands of dollars a month” of his personal savings, he refused to accept funding from investors: “It felt right to say no.”

As Cooke tells it, Yan made these decisions because he doesn’t see Hyperliquid as a company: “It was a protocol, and its neutrality from day one was the point.” 

Remaining neutral created some obstacles to overcome.

In the absence of hired market makers, Yan was forced to bootstrap liquidity with an automated vault (HLP). This was an unpopular decision: “It was effectively short a market that kept going up,” Cooke says of HLP. “People were furious.” 

Then, as trading volume exploded and there was too much liquidity, the exchange buckled. “Yan stopped sleeping for weeks. He would go to bed at 1:30 a.m. and get woken at 3 a.m. by someone pinging him that things were breaking again.”

Ultimately, however, triumph. In just its second full year of operation, Hyperliquid earned about $900 million in profit. 

Heroically, Yan retained almost none of it. “Ninety-nine percent was automatically converted into HYPE and burned, removed from circulation forever,” Cooke notes, “returning nearly all of the platform’s earnings to anyone who held the token.”

“To this day, Yan still pays many of the team’s costs himself.”

(Including the cost of an office chef, who prepares Chipotle for the team every Thursday, because there’s no Chipotle in Singapore.)

The journey is not complete, because Hyperliquid does not yet house all of finance. 

“That is our aspirational goal,” he told Cooke. “But it’s really hard to do, and multi-decade goals are very presumptuous.”

“Multi-decade” suggests he’s not even on the return leg of the journey as of yet — so there are sure to be many more obstacles to overcome (such as US regulators, eventually).

But Cooke says Yan will continue to take his own path. “He had always tried to live by this principle: Be very confident you’re going in the right direction, and execute well on the step you’re taking right now, without knowing exactly where you’re going.”

Joseph Campbell would say that’s the way to do it — especially if you want to rewrite the history of finance.

— Byron Gilliam

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